MYOB - How Much Do You Know About Author Finances?

 

ROGUE'S PAWN is out now! This first book in my original Covenant of Thorns trilogy has been re-released with gorgeous new covers. Look for book 2 coming July 26 and book 3 releasing August 16. 

     

Read Excerpt

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This week at the SFF Seven we're MYOB - Minding your own business! 

Seriously, we're taking a long look at how we manage the financial side of being an author. There tends to be a wide range of strategies for managing author finances. As all authors are primarily creatives (with the small exception of the widget-makers who hire ghost writers to write for them, which is another kettle of stinky fish), not all possess the inclination to crunch numbers and balance accounts.

In truth, while I think all authors should have a thorough understanding of what they should be earning, not everyone needs to be a financial guru of their own writing career. In truth, the most comfortable place for an author - or perhaps any creative - to be is independent of the need to make money doing it. This, of course, requires either family money (marrying money counts) or a spouse with a great salary and benefits. In these cases, writing money is all "gravy" and I know many authors in this position who don't really track that income.

The major downside of this model is it means traditional publishing has favored those with this privilege and also takes shameless advantage of these authors. There can be a lot of funky tickling of the financials, both from publishing houses and literary agencies. Believe me: I've seen it.

Learn to read your royalty statements and hold those who handle your earnings accountable.

The flip side is if you're like me - someone who is supporting their household with writing income. This is the other extreme, where ALL finances are author finances. I track everything scrupulously, to the point of using mathematical models to predict my future income. That's the thing about writing income: it's super unpredictable. Sales wax and wane, often due to reasons beyond anyone's control. Traditional publishing pays quarterly if you're lucky and semi-annually otherwise. There's almost no way to predict what those checks will look like, so I end up behaving like the privileged writer as above - I treat my trad income as gravy.

Self-publishing income is what allows me to pay the bills with writing. That money comes in monthly and, because I can access my sales dashboards in real time, I can reasonably predict how much money will come in. The downside of self-publishing is that the author fronts the investment. KAK covered a lot of the nitty-gritty of self-publishing costs yesterday. Most self-publishing authors can implement the simple math of outflow vs. inflow. That is, what you pay to produce and market the book should be less than the money you make from it. Where it gets into higher math is managing that income so that you can cover the costs of being alive. 

With a salaried job, or even hourly income, the basic budgeting model is to figure your monthly income, subtract your expenses, and the rest is "disposable," meaning you can spend it on stuff you want vs. the stuff you need. But with a fluctuating monthly income, this simply isn't possible. 

So, my basic model is to try to keep enough money in savings to pay for two months of expenses should I have zero income in any given month. (Which hopefully will never happen, knock on wood. My backlist is substantial at this point, so the baseline backlist income is relatively steady.) Once I have that in place, I can pay for some of the things that make us happy. This is VERY important. It's tempting to confine oneself only to needs and funnel any "extra" money back into growing the business. This works okay for a while, but it gets soul-crushing over time. We work hard; we must also play hard. Anything else is unsustainable.

As a creative, maintaining your joy in the work is key!

From my initial announcement, you'll see I'm also republishing some of my trad-pubbed books. I did ten books with Carina Press and now have the rights back to all of them. Those royalties came in quarterly, so I'm eager to see how my income on those books changes for me. So far I only have ROGUE'S PAWN up again. Republishing meant paying for covers and formatting, so a bit of investment on my part. Hopefully it will pay off.

As with all businesses, writing for a living requires a lot of hoping for that pay off. Being smart about crunching those numbers provides the reality. A balance of both is best. 

The Financial Costs of Authorhood

This week's topic: Minding Your Business:

 How I Manage the Financial Side of Being an Author

The downside of being an indie author is that all the upfront financing comes from...me. Upside, I don't have additional layers of people with whom I share my royalties like a trad-published author would (no agents or publishing houses taking a percentage).

Now that I have eight books selling on leading retail sites, I have a fair idea of production and distribution costs. 

• Art can range from as little as $300 to as much as $5,000+. 
• There's an extra $200-$400 for social media and advertising art bundles. 
• Buying art may not include cover design (aka fonts, wraps, lettering, etc.). You might need to hire a designer in addition to the artist.
• Editing costs fluctuate with wordcount and the editor chosen. I've paid an average of $1,000 for 85k-word books and $3,500 for a 125k-word book. No, that's not a math failure, that's a difference in the per-word rate charged by different editors.
• Choosing the right editor(s) for your work is a topic for a different post. 
• Formatting for ebook and paperback is something I outsource. That's a couple hundred.
• While it's worth every sanity-saving penny to me, I am limited to what changes I can make in the future without incurring additional costs. Pro and con there.
• Production costs for print books and distribution costs for ebooks are higher the more graphics included in the novel. 
• In addition to a royalty share, digital distributors charge for file size.  
• Sure, I'd love to pepper artwork throughout the book, but that gets pricey fast.

Easy to see why indie authors may choose to pre-fund a novel via Kickstarter or Patreon, right? And the costs outlined above don't include the hours (aka months/years) spent writing the novel. 

I have not gotten into audiobooks because the upfront costs are too much compared to the odds of recouping those costs, much less generating net revenue. Good narrators are worth every penny. Bland or AI-generated narrators will chase away customers. Expect to pay for quality production (which should be part of the narrarator's cost-per-finished-hour rate), but don't expect this format to become your sales leader (compared to ebook or print). Yes, some narrators accept royalty-share payments, but that's not recommended for either party. A web search will provide many horror stories of why.

Advertising is a relentless money-eating monster. Welcome to the world of small business where making consumers aware that your product a) exists and b) is worth the purchase is critical. Sadly, there is no One Magical Success Formula. Unlike book production costs, advertising costs are ongoing and subject to constant fluctuations. ROI is a BFD and it must be monitored regularly to minimize losses. There are authors who spend thousands a month on advertising, and I am...not one of them. It's not in my budget to pay more for advertising than I do for my mortgage, health insurance, or total monthly cost of living. My income simply doesn't allow for it. 

Side note: Do not take out a personal loan for the sake of advertising (yes, it happens).  

How do I manage these finances? Basic math. Income - cost of living - splurges/savings/crises - book production costs - advertising budget. I use Excel to budget and track monthlies and YOY, though Quicken for Small Business is likely to come on the scene soon.

Budgeting Self-Pub Production Costs

On the self-pub side of the publishing equation, you carry your production costs upfront. That's editing, cover art, formatting, ISBNs, copyright and in some cases, printing/distribution. Add audio production (charged per finished hour) if that's a format you offer. None of it is cheap. Yes, big backlists are critical to achieving a profit in this industry, but that's balanced by the upfront costs of production. Emotional costs are a different topic for a different post. Opportunity costs vary by individual but absolutely must be considered. If you're a speedy writer capable of producing 4+ books/year, the cost of production might be what limits how many books you publish in a year. Expect to lose money during your first few years while you build your backlist and your audience.

For my Urban Fantasy series, my cover art is my highest production cost because I didn't want to use stock photo models. I went all-in for the custom photoshoot. Yes, I could cut my art costs significantly by using premade covers or stock photo models. For me, ensuring my model didn't show up on sixteen other books that weren't mine was important enough to allocate a large portion of my budget for cover art.

I chose my cover artist because he's good, he's timely, and he also offers book production services. My "cover art" costs include images and lettering, plus banner/social media images, formatting for ebook and print, and covers for both formats. Essentially, I send my cover artist my completed manuscript and a summary description for what I want the cover to look like and, after a bit of back and forth, he (and his team) send me finished book files that are ready for uploading to distributors. For me, the savings in opportunity costs offset a significant portion of the cash cost. YMMV.

For my High Fantasy series, editing costs me more than art because the books are twice as long as the UF books, and I opted for an illustrator instead of a photographer for the art. Now, let me disabuse you of any notion that illustrators are by default cheaper than photographers. That's not remotely a true or fixed thing. Art is art, thus subject to a very wide price range. There are artists you may love but can't afford (or your schedules may never align). That's a reality that comes with the business. While it's important to have a book with a good looking cover--yes, people absolutely judge your book by its cover, hence the saying--don't blow your budget on art alone. You can always recover your books if/when your budget allows.

If you're writing a series, the production costs are a fairly fixed per-book charge, which makes them easy to budget. Ideally with a series, if you know how long that series is going to be, you can negotiate bundled pricing with your artist and/or book production team. Some will, some won't, some you'll discover you don't want to work with for the whole series (thus, ensure there's an "out" clause in any contract).

Recurring costs like website (hosting, design/build, custom email, SSL, etc.), newsletters, ads-creative, ads-runs, promotions, promotions art/copy, and subscriptions to design/creative creation sites, stock photo sites, cloud storage, distribution sites, and post boxes can be broken into annual charges, monthly, and per-use. These charges may spike when you drop a new release, but they're charges you incur even if you don't publish a new book. They're charges of running the business.

The hardest recurring cost to budget is advertising using CPC, because sometimes the company will use all your daily maximum allotment and sometimes they use a fraction of it. For the purposes of budgeting, assume they'll max you out every day. You don't want to end up in debt due to the whims of algorithms. How much of your total budget should you allocate to advertising? It varies. Less when you're starting off, more at midlist, less once you have a large and dedicated fan base. Not a particularly helpful answer, I know. The most helpful generalization I can offer is that don't spend too much when you don't have a backlist. You need inventory (aka multiple books) for ads to turn a profit because your ROI (return on investment) comes from subsequent full-price sales of your other (non-advertised) books. There are many online classes in advertising. Look for the ones that deal specifically with books and fiction in particular. Book advertising is a different beast from other products. Non-fic relies heavily on author platforms/reputations, which doesn't commonly apply to fiction (you don't need to be an Influencer to write a killer thriller). The book community is hypersensitive to social-space spamming and unsolicited inbox invasions that many product-sales classes encourage, so don't waste your money on broad-topic sessions.

Now, I could go on and on, but this rough overview probably has caused your eyes to glaze over, so I'll stop. The most important thing about writerly finances whether you're trad-pubbed, hybrid, or self-pubbed is that you have a budget and stick to it. Like any creative industry, feast and famine are real. Don't blow your money during seasons of feast; you're going to need it during seasons of famine.